Haidilao’s performance plummeted, unexpected but reasonable

The sharp drop in performance is only a symptom, and Haidilao's biggest crisis is the failure of a single explosion to meet demand.

On March 1, 2021, a cold current struck, and the northern region ushered in the biggest snowfall this year.

Like the sudden cold weather, the mood of investors in Haidilao has dropped to freezing point.

Source: Visual China

At the close of the day, Haidilao (06862.

HK) issued a profit warning.
The company expects that its net profit for the whole year of 2020 will plummet by 90%, which is more than 2 billion yuan less than 2019.

After the announcement of the profit warning, investment banks who were consistently bullish on Haidilao turned their backs: CICC lowered its target price by 3%; Hua's lowered its target price to HK$55, and Bank of China directly lowered its rating to sell.

01.

Unexpected

01.
Unexpected

Haidilao’s forecast forecast is significantly lower than the expected data range.

According to the profit warning announcement data, Haidilao’s net profit for the year 2020 is about 234 million yuan.

Based on this calculation, Haidilao’s net profit in the second half of 2020 will be 1.
199 billion yuan.
This data made up for the loss caused by the epidemic in the first half of the year, but compared with the net profit of 1.
435 billion yuan in the second half of 2019, it was still 16.

For a long time, Haidilao’s valuation has not been cheap, and the core logic supporting its more than 350 billion market value is the continuous growth of the company’s performance.

In the past five years, Haidilao's net profit has soared from 273 million yuan to 2.

345 billion yuan, with a compound annual growth rate of 71%.
In the context of rapid performance growth, investors in the Hong Kong market have rarely included Haidilao's very high PE.

There are three reasons for Haidilao’s high growth: one is to keep opening stores, the other is to continuously increase the customer unit price, and the third is to steadily increase the rate of turnover.

As of the end of June 2020, the total number of Haidilao stores was 935, which was 6.

4 times that of the end of 2015.
On average, Haidilao opened nearly 150 stores every year.
Especially in the last three years, the average number of stores opened every year is even close to 300.

While the number of stores has grown, Haidilao's per-customer price has also risen.

From 91.
8 yuan in 2015 to 112.

The most enviable thing is that the high-speed expansion has not affected the Haidilao's overturning rate.

Before the epidemic, the Haidilao's overturning rate was in a steady upward trend.

The turnover rate is the core key indicator of catering stores.
It directly represents the consumer's acceptance of the restaurant.
Haidilao's overall turnover rate of close to 5 has also created the biggest "dining miracle" in China.

The number of stores, customer unit price, and turnover rate have combined to create Haidilao's growth stock logic.

Long-term high growth even gives investors the illusion that opening a store is equivalent to making money.

But after the 2020 profit warning was announced, the core logic of Haidilao was destroyed.
Although the number of stores and customer unit prices continue to increase, the performance is not as good as expected.
It is only possible that the data of the turnover rate has declined, which also shows that consumers' enthusiasm for Haidilao is decreasing.

Although from the data point of view, Haidilao's net profit in the second half of 2020 will only decrease by 16.
45%, but this is created when the number of stores continues to rise.
In other words, the logic of making money by opening a store in the past has been broken.
There are more and more stores, but profits have declined year-on-year, indicating that Haidilao's single store value is declining.

As far as Haidilao is concerned, the most panic among investors is the reduction in performance and the reversal of expectations, which is likely to trigger a "Davies double kill.
"

02, within reason

02, within reason

The sudden drop in performance is only a symptom, and Haidilao's biggest crisis is the failure of a single explosion to adapt to the needs of social changes.

There is no doubt that Haidilao is definitely one of the most popular brands in the history of Chinese catering.
Relying on the success of this brand, Haidilao's performance has grown continuously for many years.

But at the same time, it also suffers from "Haidilao dependence", and most of the company's revenue comes from Haidilao restaurants.
For example, U Ding Maocai, Pirate Shrimp Rice, Jiayi Bing, Shiba Bian and other restaurants, contributed little to the company's overall revenue.

The catering industry is not a category with a wide moat, especially the hot pot category, which has become the first choice for entertainment star entrepreneurs.
Hot pot has the advantages of low complexity and strong reproducibility, but at the same time it is more difficult to stand out from the industry, and this is where Haidilao is rare.

As we all know, the core selling point of Haidilao is good service, and high-quality services are exchanged for consumers' approval.
But at a deeper level, the human resource system is the core competitiveness of Haidilao.
"Change your destiny with your hands" is the core value of Haidilao, and Haidilao has indeed motivated its employees with generous returns.

However, the service and human resource system are only soft indicators and cannot establish a true long-term moat for Haidilao.
In fact, the service and human resource system can be imitated.
When more and more companies follow the operating model of Haidilao, the advantages of Haidilao will become smaller and smaller.

As the saying goes: food is the heaven for the people.
It is still the taste of the food that determines the long-term wishes of consumers.
As far as taste is concerned, Haidilao’s competitiveness has never been.
Today, when all kinds of Internet celebrity hot pots are "overwhelming", it is hard to see young people choosing Haidilao as a meeting place.

This means that Haidilao's not cheap customer unit price is entirely for service.
This logic may be welcomed in certain scenarios, but it will never become a universal business truth.

If you do not spend enough time on product development and compete in the market with only soft indicators, then it is very likely to be abandoned by the times.

Consumers' tastes are changing.
If the brand does not iterate, after consumers have tried the so-called "extreme service", it is easy to have a "but that" mentality.
Even Haidilao’s competitors shouted the slogan of “not over-serving”.

In a sense, Quanjude is very likely to become the epitome of Haidilao's future development.
While peers such as Xiabuxiabu (00520.
HK) and Jiumaojiu (09922.
HK) are constantly iterating their brands, Haidilao, which relies on a single explosive model, is easily eliminated by the market.

03.
Product expansion, learn a good example from Byte

03.
Product expansion, learn a good example from Byte

Relying on a single explosive product, a company can be successful, but if you want to become the long-term king in the industry, you need the management to keep pace with the times and have a new management model.

At this stage, the market's demand for enterprises has evolved from "explosive products" to a new model of "continuous production of explosive products, continuous iteration, and mutual expansion of products".
Looking at the Chinese food market, fast-moving industries such as Dali, Master Kong, and Uni-President have maintained this development logic.

The best application of this kind of business logic is byte beating.
As we all know, ByteDance started with today’s headlines, but after years of development, it has formed a comprehensive content empire integrating information flow platforms, short video platforms, long video platforms, and novel platforms.

From the perspective of business model, content is the core part of byte beating.
Whether it is information flow, short video, long video or game, it is a specific form of presentation.

In fact, Toutiao is still one of the pillar platforms of Bytedance as of today, and MAU is stable at around 250 million, which is at a relatively balanced level.
If ByteDance has been developing a piece of business in Toutiao, then this piece of business is enough to make its life very good, but it will definitely not be able to achieve the scale it is today.

The reason why ByteDance has become a world-famous unicorn is precisely because it has continuously incubated dozens of APP matrices such as Douyin, Watermelon Video, Tomato Novel, Dolphin Stock, etc.
on top of today's headlines.

It is the strategy of multi-category layout that doubles the value of Bytedance.
At the same time, the effective interaction between the various categories allows the ByteDance content ecology to be integrated.
Today's ByteDance can no longer be summarized in a single category such as short videos and information streams, but is a content ecological platform based on algorithm push.

At this stage, the Haidilao brand has achieved great success, which is actually equivalent to today's headlines in the byte system.
But when today's headlines are in full swing, ByteDance chooses to continue to launch more types of products to enhance its competitiveness, while Haidilao has almost no new moves.

Observing the popular stores on Dianping, you will experience a cycle in almost half a year.
This is not because of the decline in the management of these stores, but each product has its own life cycle.
Whether it is a store, a video or a game, any hot item will experience the process from hot to mediocrity.

If there is no epidemic, Haidilao’s product cycle may be longer, and the single brand’s competitiveness may decline more slowly, but it cannot change the fact that the brand is declining.

In fact, Xiabuxiabu is a good example.
A few years ago, Xiabuxiabu, represented by single hot pot, once became a phenomenon-level explosion in the industry.
However, with the impact of takeaways, Xiabuxiabu's brand power gradually declined, and the company's stock price once fell to the bottom.
Only after Xiabuxiabu launched the high-end "Coucou", the stock price received the market's attention again.

04.
Valuation turning point

04.
Valuation turning point

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